HED: Medicare, Medicaid changes take toll on area hospitals

Changes in Medicare and Medicaid reimbursements helped balance the federal budget for the first time in decades. But now they’re beginning to take their toll on area hospitals – and health care administrators say the prognosis is bleak.

The changes as a result of the Balanced Budget Act already have forced cutbacks in some services the federal medical plans used to cover.

And because of reductions in home health services, patients may have to remain in hospitals longer than in the past.

Home health takes hit

“The biggest change has been in home health reimbursements and that’s the last place you want to cut,” said Gerald Wages, chief operating officer for North Mississippi Health Services in Tupelo. “People want to be cared for in their home and it’s less expensive. We’re continually trying to move patients toward less expensive levels of care but they’ve taken away that option so we may be forced to keep them in the hospital longer than normal.”

At NMHS, Wages said the changes brought about by the federal budget reforms cost his system $10 million this year and that loss will rise to about $12 million in 1999. Of that $10 million loss this year, Wages said $6 million was in home health reimbursements.

The biggest change in those reimbursements was that the government will no longer pay for nurses to draw blood for testing in a home environment.

“We’ve gone from 500,000 (home health) visits a year to less than 300,000,” Wages said.

Dana Williams, chief financial officer for Baptist Health Care System’s north Mississippi hospitals, said unless some changes are made in home health reimbursements, some facilities may be forced to shut down those operations.

“We feel there is a need for further relief in home health care for anyone to continue operating that service,” Williams said. “We’ve had to make drastic cutbacks there.”

No layoffs yet

Both NMHS and Baptist say they have not had any layoffs as a result of the reductions but have had to shift personnel around and reduce costs.

“All of our (home health) nurses use laptops now so they’re more efficient and we’ve consolidated billing in a central location,” Williams said. “Nurses who have left have not been replaced and some have transferred to other hospitals.”

Home health services aren’t the only hospital services affected by the changes.

Gilmore Memorial Hospital in Amory doesn’t operate a home health department but is still feeling the federal pinch.

“As of Oct. 1, 1998, it is no longer based on cost but on a blended rate,” Charles Knight, Gilmore’s chief financial officer, said of reimbursements for subacute care, a transitional level of care between hospitalization and home care.

“How that affects us is we have to increase the utilization of that unit and reduce the cost,” Knight said. “We are currently evaluating our subacute care issues to see how best to handle that.”

In addition, reimbursements for rehabilitation services are changing from a cost-based system to a fee schedule.

“We’re probably looking at a 5 to 15 percent reduction in reimbursement and the only way to respond is to increase utilization and reduce costs,” Knight said.

Higher costs

Although all three hospital administrators said services to patients are actually increasing at each of their facilities instead of decreasing, they expect costs for patients to rise as a result of the federal changes.

“It’s been at least five years since we’ve had a price increase at two hospitals (in north Mississippi) and two just recently had an increase,” Baptist’s Williams said. “We expect to have a 3 to 4 percent increase.”

“We had a price increase of 5 percent,” said NMHS’ Wages, who said in addition to a $10 million loss in federal reimbursements his system has seen charity costs for indigent patients rise from $7.7 million in 1995 to $13 million this year.

“That’s a 69 percent increase in charity cases,” he said. “The state just doesn’t have the money and the welfare reform act has taken a lot of people out of Medicaid and now they have no coverage at all.”

An aging population will also tax the system as it is currently configured with the number of people over 65 and eligible for Medicare rising over the next decade.

“Starting in 2005 it’s going drastically up,” Wages said of the elderly population. “With Medicare reimbursements going down, it’s going to be difficult for us to have the system and services we have in their current form. I don’t know what it will be.”

Outlook

The federal health insurance programs also face technological problems. A change from the current interim reimbursement system to a prospective payment system, which administrators said would further reduce their reimbursements, has been put on hold because of computer problems.

“Our biggest problem next year will be how (the Health Care Finance Administration) responds to the year 2000 problem,” Knight said of the computer bug afflicting many systems. “Early indications are they will not be ready. If they can’t issue payments, we don’t get paid.”

Administrators said they don’t see any relief anytime soon.

“The easy thing to do is just pay everybody less money rather than address the real issues,” Wages said of the trend in Congress.

“We continue to be involved in legislative activity. Senator (Thad) Cochran (R-Miss.) was one of the sponsors in the final days of the session that did enact some relief,” Williams said of legislation that delayed implementation of further reductions.

First District U.S. Rep. Roger Wicker, R-Miss., said he expects some action on reversing the actions of the Balanced Budget Amendment in the next session of Congress but as yet no specific plan has been formulated.

“I think the hospitals have a very valid point,” Wicker said. “I do think some modification in the law is called for. I am hopeful we can pass legislation early on in 1999 to address those concerns.”

However, a spokesman for Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee, said no specific proposals for reforming Medicare and Medicaid have yet been formulated.